20 January, 2021
ODM can be seen as a little bit daunting to some companies.
You might be unsure whether they’ll ease your operations or plague them with unforeseen dangers that will harm the company image more than it will help.
The answer to this question remains in the context of your company and a careful weighing up of the pros and cons as when one is heavier than the other the answer will be clear.
ODM’s Five Pros
1. Cheaper Than Manufacturing Your Own Product
Starting a product from scratch costs a lot of money.
Designing a product, and testing the effectiveness all require a lot of capital and time.
Therefore having an ODM company that does all this means that much money is saved and can be put towards other aspects of the business that might be equally important and are more within your range of expertise, for example, sales and marketing.
People make decisions like these every day.
One example I like to use is deciding to buy bread from the supermarket instead of getting all the ingredients to make the mentioned bread.
Just going to the supermarket and buying the bread will be cheaper, more convenient, and faster than baking the bread yourself, especially if you’re not a baker.
At the end of the day you spend money ether, but a lot less than the amount that would go into making bread.
You also save a lot of time.
2. ODMs Speed Things Up
An ODM company does not have to worry about doing research and development for a product, or testing the product, they did it all a long time ago already.
All an ODM company has to worry about is rebranding an already made product to be uniquely linked to the company that is buying it now.
For example, an ODM that already knows how to make a smart blender, whichever company orders it now, all they have to do is change colors and logos to make them fit the company brand.
So, in this example, a company that wants to sell such blenders, all they have to do is order them and in around one month, depending on the amount they order, will be delivered and they’ll be ready to sell.
Developing your own smart blender could take years.
This kind of thinking is why people looking to hire someone to work for them often look for people who already have the experience to do the job so that they need not spend any if not all their time helping the person acclimatized and instead they can get straight down to business.
3. Leave Manufacturing to the Professionals
The inside of a factory showing lots of components and machinery.
This means that to run your business you do not need any of the skills required in manufacturing.
All the time and money you would have spent setting up a manufacturing operation can go into another aspect of your business.
Manufacturing requires a huge amount of space, employees, and money, not having to worry about any of this can also be another bump in the direction of doing well in business.
4. Reliable and Tested Products
Products across different categories need certifications before they can be sold in a specific market.
The more complicated the product is, the more certifications is likely to require, or the more complicated the certification will be to get.
Certifications are highly time-consuming in electronics manufacturing.
An ODM has already done all tests and obtained certifications for the product they’re selling, so that’s another thing you can cross off your list if you go the ODM way.
5. It’s Proven to Work
A simple search in Alibaba or Made in China will disclose a huge amount of factories offering ODM services across different product categories.
Many companies selling their product on Amazon use ODMs, then all they do is work on their marketing and sales service to ensure they get positive reviews and keep people buying.
Low range to mid-range smartphones are also made through ODMs
ODM’s Five Cons
Although as you’ll see below there are some cons to using an ODM, one way that can put a stop to many of the risks is thorough research of ODM manufacturers.
Ways to research them can be looking to see what other brands work with them.
If such brands are well-known or reputable brands, the ODM manufacturer is trustworthy as if they weren’t they would not be able to stay in business.
Also the chances of an ODM that isn’t reliable having horror stories or people mentioning whatever disagreements they have had very vocally is quite high.
1. It Might be Difficult to Stand Out
Your product will be similar to other products from other companies because your manufacturer is not making the product specifically for you.
The same product they’re selling to you will be sold to many other companies, with some minimal variations of course.
This means competition will be fierce.
Unless your brand is already well known or you have something creative in advertising to set you apart from other brands, your product may get lost in the crowd and you may even have to decrease the prices of your products so that they will get bought.
2. Never Fully Owning The IP
The IP belongs to the ODM manufacturer, not you therefore you never have proper ownership over the products you sell.
Meaning you can’t control who else the company sells the product to and don’t have control over legal decisions that are made around that product.
3. Competitors Legal Accusations
While uncommon, it could happen.
Because your product may look like the ones from another brand or be the same, in case your ODM partner decided to just copy someone else’s proprietary design.
If this is the case, and beyond your manufacturer, someone else has a bigger legal claim you could face legal repercussions or lose the right to sell the product.
The Spiderman meme depicting the concept of not being able to decipher one thing from the other.
4. Not Being Able to Improve the Product
Let’s say you’re killing it in sales and your clients want an upgraded version of the product, they want it to include X, Y new features.
But such features would require a full or partial redesign of the product, well, convincing your ODM to help you get the new products done will be tough.
Most ODMs don’t care for new product development, especially if it requires new molds.
In this scenario, you’re better off looking for a design house to help you develop and manufacture a new product.
5. Opportunity Cost
It’s only when you’re too far in the process when you’ve spent money and resources and the products are about to arrive that you can analyze whether it was worth it or not.
Perhaps doing your own product design and then looking for an OEM would have been better, but of course, to do such a comparison you would need experience or someone in your team with experience working with an OEM.
It’s only when you have hindsight that you really know what would’ve been the best plan of action.